Supreme Court Upholds Full Recovery Under Promissory Note | Cash Component Cannot Be Disregarded for Lack of Documentary Proof
Kiran Raj
The Supreme Court of India Division Bench of Justice Ahsanuddin Amanullah and Justice Vipul M. Pancholi held that a money transaction recorded in a promissory note cannot be partly disallowed merely because a portion was advanced in cash rather than through bank instruments. The Court ruled that the absence of documentary proof does not, by itself, negate a cash transaction when the promissory note acknowledges the entire amount. It accordingly restored the Trial Court’s decree of ₹35,29,680, setting aside the Kerala High Court’s modification that had limited recovery to ₹22,00,000.
The matter originated from a financial transaction between the appellant and the respondent, which was formalised by a promissory note. The appellant asserted that the respondent had borrowed ₹30,80,000, acknowledging the loan through execution of the promissory note. A suit was filed for recovery of the amount with interest, totalling ₹35,29,680.
The Trial Court decreed the suit in favour of the appellant for the full sum, finding that the note constituted binding acknowledgment of the debt. The respondent challenged this decree before the High Court of Kerala. The High Court, while upholding the existence of the promissory note, reduced the decretal amount to ₹22,00,000. It reasoned that only this portion, which had been advanced via banking channels, stood conclusively proved. The balance, allegedly paid in cash, was excluded on the ground that no documentary evidence supported it.
The appellant, dissatisfied with this reduction, approached the Supreme Court by way of special leave. Counsel for the appellant argued that once the promissory note was admitted and accepted by both courts, its contents had to be given effect in full. It was submitted that ₹22,00,000 had indeed been transferred through bank transactions, but an additional sum had been handed over in cash. Counsel maintained that the High Court’s rejection of the cash portion solely for lack of receipts was erroneous, since the respondent never disputed signing the promissory note or its recitals.
Despite service of notice, the respondent chose not to appear before the Supreme Court. The Bench proceeded to consider the matter on the basis of the record. The central issue was whether the High Court had been correct in disregarding the cash component of the transaction even though it was recorded in the promissory note.
The Division Bench examined the record and observed that the appellant had consistently maintained that ₹30,80,000 was paid to the respondent under the promissory note. The Court stated: “There being specific stand by the appellant that he has paid Rs.30,80,000 to the respondent pursuant to a promissory note, which incidentally has been upheld and not disbelieved, the onus would be on the respondent to dispel such fact.”
The Court rejected the approach of limiting proof only to bank instruments. It observed: “It is not uncommon that in money transactions, there is a component of cash also involved and just because a person is not able to prove the transfer through official modes i.e., through any negotiable instrument or bank transaction, would not lead to the conclusion that such amount was not paid through cash, especially when there was a categorical statement to this effect by the appellant before the Court concerned.”
Addressing the presumption under law, the Bench noted: “Moreover, the initial presumption of legally enforceable debt comes from the Negotiable Instruments Act, 1881 also and thus the onus is on the respondent to prove that no such amount was given. Only because documentary proof was not available, we find such view taken to be erroneous.”
The Court also recorded that cash dealings are a recognised reality: “A person who gives cash obviously would not be having any documentary proof per se. Sometimes there may be an occasion where even for a cash transaction, a receipt is taken, but absence of the same would not negate and disprove the stand that the cash transaction also took place between the parties.”
Summarising, the Court stated: “In the present case, the bifurcation made by the High Court is clearly erroneous and therefore, unsustainable.”
The judgment recorded: “For the reasons aforesaid and taking an overall circumspection of the facts and circumstances of the case, the appeal is allowed. The impugned order is set aside. The order of the Trial Court stands restored.”
Advocates Representing the Parties
For the Petitioners: Ms. Usha Nandini V., Advocate-on-Record; Mr. Biju P. Raman, Advocate; Mr. John Thomas Arakal, Advocate; Ms. Ashima Gupta, Advocate.
Case Title: Georgekutty Chacko v. M.N. Saji
Case Number: Civil Appeal No. 11309 of 2025 (Arising out of SLP (Civil) No. 10362 of 2024)
Bench: Justice Ahsanuddin Amanullah and Justice Vipul M. Pancholi
